Trusts

Question 1

Advantages and disadvantages of trusts

Answer 1

Cost saving by splitting tax between multiple beneficiaries
Asset protection
Estate planning

Dis
Loss of control
Loss of future income

Question 2

S25B income of trusts and beneficiaries

Answer 2

Beneficiaries taxed on amount vested to them or distributed to them unless S7 applies
Trusts taxed on undistributed income unles beneficiaries has vested right thereto or S7 applies and taxed in hands of founder.
Amts taxed in foreign trusts and distributed to Ben will be taxed in his hands
Deductions claimed by person who is gets income
Ltd to income accrued to Ben and excess used by trust ltd to income

Question 3

Trust

Answer 3

Contingent beneficiary no right to assets
Vested beneficiaries have vested right thus assets will be included in their estate
Taxed at 40%
Income retains its character. Pro data the income unless specifically stated otherwise.
If paid in annuity still retains identity but 10 (1) k and interest exemption to non residents not available
If retained in trust it loses its identity

Question 4

S7 When income deemed to be accrued or received

Answer 4

Donations
for purpose to reduce or avoid tax
To minor child
Subject to conditions which prohibits pmts of income until event - in a discretionary trust amounts retained will be taxed in donors hands
Retention of right of revocation - when Ben has right to income, will be taxed in donors hands
Cession of income if investments , but retains ownership or will regain it of asset or right. Income received taxed in donors hands
To non residents
Woulidge case interest free loan is a continuous disposition. Ltd income to amt saved by trust from not paying interest

Question 5

S7 When income deemed to be accrued or received

Answer 5

Donations
for purpose to reduce or avoid tax
To minor child
Subject to conditions which prohibits pmts of income until event - in a discretionary trust amounts retained will be taxed in donors hands
Retention of right of revocation - when Ben has right to income, will be taxed in donors hands
Cession of income if investments , but retains ownership or will regain it of asset or right. Income received taxed in donors hands
To non residents
Woulidge case interest free loan is a continuous disposition. Ltd income to amt saved by trust from not paying interest